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The Affordable Care Act and premium assistance

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The Affordable Care Act The Affordable Care Act

Did you know that premium assistance for individual insurance under the Affordable Care Act is an advance on a 2014 tax credit? If you are thinking of using the marketplace to buy insurance, that distinction is important, as are these other questions.

What is my family size for the ACA? 

Your family size is all people for whom you properly claim a deduction.

What is my Household Modified Adjusted Gross Income (MAGI) for the ACA? 

Your MAGI starts with all reported income minus front page adjustments. This is line 4 from a 1040EZ, line 21 from a 1040A and line 37 on a form 1040 To this figure you add untaxed social security income, tax-free interest and excluded foreign income. Your Household MAGI is the MAGI of yourself and dependents you are eligible to claim and who are required to file a federal tax return.  

Which year's income is my health premium assistance figured on? 

Trick question. Premium assistance (the amount paid directly to insurance companies) is an optional way to receive your 2014 (Health Insurance) Premium Tax Credit. It is calculated from your household's 2014 income. However, advance premiums are estimated based on your 2012 tax return or verifiable income information for 2013, such as paystubs.

And what if my projected income differs from my actual income in 2014? If your income varies from what you projected, you should report it through the marketplace. And when you file your 2014 taxes, there will be a reconciliation.

In reconciliation, your actual Premium Tax Credit will be calculated from your actual MAGI. If you are eligible for higher credit than the premium assistance you received, the additional credit is refundable.

If, on the other hand, your income is more than what you projected, you may wind up repaying premium assistance.  Fortunately, in many cases, repayment will be limited.

Currently, payment amounts will be based on how your 2014 income compares with the Federal Poverty Level (FPL). Maximum repayment is as follows:

Household IncomeSingle FilersAll other Taxpayers

Less than 200 percent of FPL$300$600

200 percent to 300 percent of FPL$750$1500

300 percent to 400 percent of FPL$1250$2500

400 percent or more of FPLunlimitedunlimited

Can I make changes mid-year? 

Yes - in fact, you are required to report to the marketplace changes in income, family size, marital status and availability of other government or employer insurance.

I use the Married Filing Separate Status, is there anything I need to know? 

Yes - you are not eligible for Premium Tax Credit.

Can I get Premium Tax Credits to help with any health insurance? 

No - credits are only for qualified insurance purchased through the marketplace.

Must I take advance payments if I am eligible for them? 

No - advance premium payments are optional. 

Where can I find more information? 

The IRS (irs.gov) has a link on its front page to Affordable Care Act Tax Provisions.  

If you are looking at a Premium Tax Credit, income planning is very important. Changes are expected, but as the law is written small income changes can have outsized effects on your Premium Tax Credit, especially at 400 percent of FPL.  

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